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UBS Consumption Indicator: Slight decline in February
The UBS Consumption Indicator fell slightly in February. Since the middle of last year, it has underestimated consumption growth.
The UBS Consumption Indicator fell slightly in February: From its January level of 1.32, it dropped to a value of 1.20 in February. This marked a return to the December 2009 level.
The UBS Consumption Indicator is based on five sub-indicators: new car registrations, business activity in the retail sector, the number of overnight stays in domestic hotels by Swiss nationals, the consumer sentiment index, and credit card transactions processed by UBS at points of sale in Switzerland. The decline in February is mainly attributable to deteriorating business activity in the retail sector.
The UBS Consumption Indicator's status can normally be inferred from the previous year's growth rate of private consumption. In the fourth quarter 2009, however, the growth rate of private consumption estimated by the State Secretariat for Economic Affairs SECO was far higher than the value forecast by the Consumption Indicator. For first quarter 2010, UBS economists also expect consumption growth to exceed the Indicator's current value.
The divergence between actual consumption growth and the Consumption Indicator may be attributable to the fact that the two survey values that feed into the indicator (consumer sentiment and business activity in the retail sector) may show the situation as being worse than it actually is. Experience shows that a subjective estimate of the state of the economy may often lag behind actual developments, particularly following cyclical turning points. During the upswing of 2003, for example, actual consumption growth was also far above the Consumption Indicator level for several quarters. UBS expects growth in private consumption of 1.7% for 2010. The Consumption Indicator may continue to underestimate actual consumption dynamics for several more months to come.
UBS consumption indicator and private consumption in Switzerland
(Private consumption: year-over-year change, in %, UBS consumption indicator: index level)
Calculation of the UBS Consumption Indicator:
The UBS Consumption Indicator signals private consumption trends in Switzerland with a lead of about three months of the official figures. At 57%, private consumption is by far the most important component of Swiss GDP. UBS calculates this leading indicator from five consumer-related parameters: new car sales, the business activity in the retail sector, the number of domestic overnight hotel stays by Swiss nationals, the consumer sentiment index and credit card transactions made via UBS at points of sale in Switzerland. With the exception of the consumer sentiment index, all of these data are available monthly.
Caesar Lack, Economic Research Switzerland
Tel. +41 44 234 44 13
Hans-Peter Hausheer, Economic Research
Tel. +41 44 234 67 32
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research